Diabetic kidney disease is the leading cause of kidney failure worldwide and places considerable burdens on health-care systems. The renoprotective effects of renin–angiotensin–aldosterone system (RAAS) inhibitors have been demonstrated in patients with diabetes, especially when the patient has hypertension. The major pharmacological action of sodium-glucose cotransporter 2 (SGLT2) inhibitor is inhibition of glucose reabsorption in the renal proximal tubule, thus enhancing urinary glucose excretion and reducing the glucose level. Landmark kidney outcome trials have demonstrated that apart from their glucose-lowering effect, SGLT2 inhibitors reduce the risk of development or worsening of albuminuria through a range of mechanisms in patients with or without diabetes who have albuminuria and declining renal function. These mechanisms include reduction of intraglomerular pressure through restoration of the tubuloglomerular feedback; reduction of glomerular hyperfiltration through decreased activation of the RAAS; improvement of tubular oxygenation and metabolism; protection against inflammation, oxidative stress, and fibrosis; and lowering of albuminuria and renal decongestion through a diuretic effect. Several cardiovascular outcome trials have discovered the potential renoprotective effects of these agents in patients with or without diabetes. This review analyzes the most recent findings from clinical trials and identifies the mechanisms through which SGLT2 inhibitors exert renoprotective effects in patients with type 2 diabetes and chronic kidney disease.